The UK Chancellor of the Exchequer, Rachel Reeves, needed to take the wins where she could in the Spring Forecast on 3 March 2026. There were some small green shoots to point towards: falling inflation, a reduction in government borrowing, and the fact that the economic forecasts haven’t got any worse.

The central forecasts for the economy haven’t changed an awful lot since the Autumn Budget in November 2025, but it's not a rosy picture in the short term. Economic growth is now expected to slow by 0.3%, from 1.4% in 2025 to 1.1% by the end of 2026. The Office for Budget Responsibility (OBR) predicts that it will pick up to an average of 1.6% from 2027 until 2030.

This is partly due to a predicted increase in overall productivity growth – rising to 1% – due to higher levels of investment. Labour supply growth is expected to slow to 0.5% in that same period as the UK population ages and net inward migration lowers. The OBR predicts this will offset productivity growth bringing the level of potential output down by 0.25% in 2030.

Conversely, real GDP per person is forecast to grow by 1.1% a year on average until 2030, representing a significant improvement compared to the previous five years, thanks to higher investment.

Unemployment set to peak in 2026

The OBR predicts that the unemployment rate will rise one-third of a percentage point faster in 2026, from 4.75% to 5.33% in 2026, compared to its forecast in November. This is driven by a reduction in entry-level roles. Unemployment will fall gradually from 2027, to 4.1% by 2030.

Global uncertainty could push the economy in a different direction

The OBR stresses that global uncertainty and instability could have a significant impact on the UK economy, potentially wiping away any future economic improvements. It stated: “Conflict in the Middle East, which escalated as we were finalising this document, could have very significant impacts on the global and UK economies.”

The war between Iran and the US/Israel is already having an impact on global supply chains, particularly due to the closure of the Strait of Hormuz. The Chancellor addressed those potential impacts in her statement, saying: “It is incumbent on me and on this government to chart a course through that uncertainty, to secure our economy against shocks and protect families from the turbulence that we see beyond our borders.”

She added, “I want to reassure this house that I am in regular contact with the governor of the Bank of England, with our international counterparts, and with key effective industries, including our maritime sector, and tomorrow, I will meet with our North Sea industry leaders to discuss the implications that they face and work with them to manage this uncertain period.”

ICAEW’s Chief Executive, Alan Vallance, said: “While businesses will be relieved that they will not have to respond to any major policy announcements from the Chancellor, their attention will be turned to the situation in the Middle East. In an increasingly volatile world, having just one fiscal event a year is the right move to dampen speculation and increase certainty.

“Our members tell us that they want stability, but since these forecasts were finalised, the world has again changed. People and businesses will be concerned about the impacts of more geopolitical uncertainty, and it is inevitable that costs, particularly energy costs, will rise.”

Vallance warned that that the OBR’s downgrading of growth for this year was “ominous”, particularly given events in the Middle East, with stock markets tumbling and oil and gas prices rising.

“In spite of geopolitical volatility, the government must stick to the basics, cultivating the conditions to give businesses confidence to invest, hire and grow,” said Vallance. “Our members say that doing business is too expensive, too complicated and too uncertain, so tackling the obstacles to growth will be a positive first step.

“This unfolding crisis underscores the need to foster a more stable and supportive environment for business, including developing a long-term fiscal strategy that puts the public finances on a more sustainable path and an urgently needed commitment to comprehensive tax reform.”